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Stocks opened lower yesterday following an interview with the influential president of the Federal Reserve Bank of St. Louis, James Bullard. The St. Louis branch of the Fed has traditionally been the unofficial spokesman for whatever the Fed chairman would like to make public. And so, when James Bullard said the board might not take as strong an action as the market has anticipated, people not only listened, but sold stock.

On the economic front, initial claims for jobless benefits last week rose by 4,000, which was greater than forecast. The Commerce Department said that new-home sales rose in July, exceeding forecasts. And the FHFA reported a higher-than-expected advance in June house prices. Finally, the purchasing managers’ index rose slightly more than expected, which is an early sign of an improvement in the U.S. factory sector.

However, good news is now treated as bad, since Wall Street was counting on a boost from the Fed, which is now unlikely thanks to better economic numbers. Thus, the DJIA fell 115 points to 13,057, the S&P 500 fell 11 to 1,402 and the Nasdaq was off 20 points to 3,053. The NYSE traded 592 million shares, while the Nasdaq crossed 353 million. On the Big Board, decliners were ahead of advancers by 2.2-to-1; on the Nasdaq, decliners were ahead by more than 2-to-1.

Our regular readers know that at an important turn in the market, I will go to the NYSE Index to see the recent impact on all of the stocks traded on the Big Board. The NYSE chart shows a reversal (CBR — our internal indicator) on Tuesday as the index reversed from its May 1 high. It has had five consecutive days down, and yesterday was the worst, off 63 points, which triggered a new MACD sell signal. Yesterday’s low was at 8,001, just above the 20-day moving average at 7,991, which is its next support. Support then rests around the July high at 7,900 and then the intersection of the intermediate support line, the 50-day moving average and the 200-day moving average at about 7,800.

My guess is that in September we will test the intermediate support line and the 200-day moving average, where we should take major new long-term positions.

Yesterday, I listened to the entire CNBC interview with Bullard. This is what I heard after replaying parts of it several times:

The U.S. economy is improving but at a slow rate. However, no further drastic easing need take place now. The upcoming rate meeting likely will contain some sort of minor stimulus.

Europe is in real trouble, “Europe is not prepared to deal with this crisis.” “The ECB can’t do all things to fix the problem.” “The common market is at risk — I am very worried about it and its impact on the U.S. economy.”

With regard to Mario Draghi’s statement, Bullard said that it was akin to “Lincoln’s been shot and his surgeon says, ‘I’ll do whatever I can to save him.’”

This is a monthly chart of the Vanguard FTSE All-World ex-US ETF (NYSE:VEU). This is a five-year chart of most markets outside the U.S. It has not fully recovered from last summer’s decline, but following a three-month rally and a close above its 200-day moving average, it looks much better than in May. But it still is making lower highs, and so until the January high at just above 45 is taken out, the possible head-and-shoulders formation still is in play.

This is a daily chart of the iShares MSCI EMU Index Fund (NYSE:EZU). It contains the markets of almost all of the common market countries. The recent rally that popped the ETF above its 200-day moving average (red line) is due to the Draghi statement. If Europe cannot handle its crisis, as Bullard contends, then the right shoulder of this head-and-shoulders formation likely will collapse.

Conclusion: With Europe in trouble and China’s rate of growth slowing, the U.S. eventually might be the fortress of the world’s economy. That is why long term I’m bullish, but shorter-term, the NYSE chart speaks for itself, telling us that the near-term trend is down and that defensive measures should be taken now. This includes short selling, purchasing precious metals and culling out non-performers.